Under new Federal laws, the Australian Competition and Consumer Commission (ACCC) is aiming to pursue unfair contracts by large companies that squeeze smaller subcontractors and suppliers.
The law will apply to contracts less than $300,000 within a year, or $1 million over many years between a big business and one with fewer than 20 staff, in a report by the West Australian.
Michael Schaper, acting chairman of the ACCC, said the watchdog planned to enforce the law from November.
If a clause is deemed unfair, it can be voided under the law – which passed Parliament last year – and the ACCC can seek compensation for the small business.
Schaper added that industry representatives should revise their contracts before the law is enacted.
“Clearly, when a new law like this comes into place, one of our priorities is to make sure it’s seen to actually work,” Schaper said.
“You would expect the Commission would be investigating these matters but also, if we think there’s a clear problem, to be dealing with some of them.”
Independent contracting is one of the commission’s five priority areas for their new regime. It also includes retail leasing and advertising, telecommunications services, and franchising.
The treatment of building subcontractors is a growing State election issue in Western Australia, with increasing disputes over conditions and payments, particularly as contracts favour larger companies while smaller businesses are forced to accept the changes, often involving more work and less extra payment.
Unfair contracts include the shift in responsibility away from larger companies and unilateral contract changes, which could enable companies to alter terms without options for small contractors to withdraw from it.
Rio Tinto recently doubled their payment terms from 45 to 90 days in an effort to free up cash flows and resolve account invoices, receiving heavy backlash from both State and Federal Governments. The decision was briefly overturned then later reinstated in May with Rio announcing it will ask only larger contractors and suppliers to consider the 60 to 90 day payment terms.